LONDON, Dec 7 (Reuters) - The bleak outlook for the European
economy knocked the euro and stalled gains the region's share
markets on Friday, as investors waited to see if nonfarm
payrolls data in the United States might affect its monetary
policy plans.

A day after the European Central Bank cut its forecasts for
growth across the 17-nation euro area next year, Germany's
Bundesbank said there was a chance the region's debt crisis
could send Europe's biggest economy into recession.

The euro dropped 0.25 percent to a low of $1.2932
after the Bundesbank statement, extending losses of over one
percent seen on Thursday in reaction to the ECB's new forecasts
which have heightened speculation of a early rate cut.

"It is unusual that a negative growth projection for the
next year is offered before the end of the current year, but
with such a view, markets are naturally pricing in an interest
rate cut," said Daisuke Karakama, market economist for Mizuho
Corporate Bank.

The main March 2013 German government bond futures contract
, which had rallied sharply on the talk of an early ECB
rate, was about 3 ticks lower at 145.66, with traders cutting
back positions ahead of the U.S. jobs data.

European shares were fractionally higher in early trading,
but mainly consolidating around the 18-month highs reached on
Thursday on hopes of an improving economic performance in the
global economy.

The FTSEurofirst 300 index of top European shares
traded up 0.2 percent at 1,133.95 points, with Germany's Dax
up 0.1 percent after the Bundesbank's announcement.

London's FTSE 100, and Paris's CAC-40 opened
flat to slightly higher, while a slight dip in U.S. stock
futures hinted at a cautious Wall Street open.

Investors are focused on U.S. non-farm payrolls data, which
is expected to show an addition of 93,000 jobs in November,
probably dented by superstorm Sandy, against October's gain of
171,000. The figures, due at 1330 GMT, are also likely to show
the unemployment rate holding steady at 7.9 percent.

Brent crude meanwhile was steady above $107 per barrel, but
prices were headed for their biggest weekly loss in more than a
month on the worries about the euro zone's economy and on-going
concerns about the looming fiscal crisis in the United States,
the world's top oil consumer.

Brent rose 0.1 percent to $107.14. while U.S. crude
futures inched up 0.2 percent to $86.41 a barrel.